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Feds Probe Pipeline Overcharging

Monday, November 19, 2012

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Federal regulators are investigating rates charged by two interstate natural gas companies to determine if they are “over-recovering” their costs, resulting in “unjust and unreasonable” rates for customers.

The Federal Energy Regulatory Commission (FERC) announced the action Friday (Nov. 16) targeting Wyoming Interstate Company (WIC) and Viking Gas Transmission Company.

The orders give each company 75 days to file a full cost and revenue study. The investigations stem from Form 2 cost and revenue information provided by WIC and Viking for 2010 and 2011.

Wyoming Interstate Company
Wyoming Interstate Company

Regulators say Wyoming Interstate Company (WIC) had a return on equity of 19.55 percent for 2010 and 18.51 percent for 2011.

FERC said that its staff analysis “indicates that current rates may allow the companies to recover revenue substantially more than their actual costs of service.”

Wyoming Interstate Company

Wyoming Interstate Company is wholly owned by El Paso Pipeline Partners, a Kinder Morgan company. The company’s current rates were established as part of a settlement approved by the Commission in September 2000. FERC staff estimates WIC’s return on equity (ROE) at 19.55 percent for 2010 and 18.51 percent for 2011.

WIC is comprised of a mainline system that extends from western Wyoming to northeast Colorado (the Cheyenne Hub) and several lateral pipeline systems that extend from various interconnections along the WIC mainline into western Colorado and northeast Wyoming and into eastern Utah.

The system has about 800 miles of pipeline and a design capacity of about 3,340 million cubic feet per day. Colorado Interstate Gas Company (CIG) operates the WIC system under a service agreement.

Company Statement

Kinder Morgan spokesman Richard N. Wheatley issued this statement:

“Wyoming Interstate Company (WIC) will aggressively defend its current rates, which we deem to be just and reasonable.

“WIC is confident that it will be able to maintain its current rate levels.  Any outcome from this FERC action is not anticipated to have any substantial impact on the overall earnings of the company.

“WIC intends to cooperate with the FERC and will comply with its order to file a full cost and revenue study in 75 days. We look forward to an expeditious resolution of this matter."

Viking Gas Transmission

Viking Gas Transmission, owned by Tulsa, OK-based ONEOK Partners LP, has a design capacity of 0.5 Bcf/day and provides firm and interruptible natural gas transportation services.

Viking Gas Transmission Company
ONEOK Partners

Federal regulators suspect the companies of “over-recovering” their costs, resulting in “unjust and unreasonable” rates for customers.

FERC staff estimates the company’s ROE at 21.39 percent for 2010 and 21.75 percent for 2011.

The 670-mile system receives Canadian natural gas at the Manitoba/Minnesota border and connects with four major pipelines serving markets in North Dakota, Minnesota and central Wisconsin. Its current rates were established in a settlement approved by the Commission in November 2002.

Company Response

Viking said in a statement that it had been notified Thursday morning (Nov, 25) of the FERC review.

"We will cooperate fully with the FERC during this review process," the company said.

"As an operator of interstate natural gas pipeline assets, ONEOK Partners works to comply with all FERC regulations," the statement said. It noted the 2002 rate settlement, "which determined the tariff structure to be followed by Viking."  

   

Tagged categories: Federal Energy Regulatory Commission (FERC); Oil and Gas; Pipelines; Pricing; Regulations

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